Trading And Falling In Love

[thetradingdoctor]

Several times in my writing and perhaps on this board, I have referred to the market as a demanding mistress. There are correlates between trading and falling in love.

According to the following recent report from the L.A. Times, falling in intense love is often based on potent threat, fear, worry or shared anxiety.

While people can and do fall in love for a variety of reasons, the spark that ignites powerful, tempestuous love can often occur as a direct result of shared danger, threat or perceived fear. The body ‘translates’ the anxiety felt in the perilous place and “gloms� onto the nearest love object in the vicinity at the time of the anxiety.

http://www.latimes.com/features/heal...adlines-health

Examples are obvious. People who experienced the anguish of searching for relatives following 9/11 sometimes connected passionately when they would never have looked at the other in balmier circumstances. Ex-pats often hook up when they are living in strenuously difficult new surroundings. Victims of disasters often bond. Holocaust survivors met and married in record time, brought together by inconceivable sorrow and grief, and bound by the urgency of living into tomorrow.

In my personal life, I experienced something similar in the mid-70’s. At that time I was traveling the world for a multinational pharmaceutical company ( ARRGH!! – nonetheless, it was a nine year gig that took me around the world way too many times for a total of some 1.5 million miles). On an approach to the Rome airport, something happened to the plane. I am not sure exactly what it was, but we thought that perhaps the tail of the plane had been damaged. There were people praying and chanting as we thought it was a crash and everyone was going to die. I looked at the man next to me who was a Finnish scientist of some kind. I had never seen him before we boarded that plane. We put our arms around each other and professed our love for each other. We held each other very tightly and I was in love with this man at the time I knew I was crashing to my death. How silly I felt afterward( as did he), but I will never forget his face, the way he held me and how much I loved him during those frightening moments, which seemed an eternity.

In these situations, the body pours out a variety neurochemicals and neurohormones ( dopamine, serotonin, oxytocin, phenylethylamine and others) that bond people to each other in certain ways.

If what the researchers have found to be true, men faced with attractive women in the middle of a rickety bridge will much more likely fall in love than those who meet those same attractive females on a ‘safe’ bridge without the ostensible threat of falling to their deaths.

The Market Mistress has the nasty habit of putting traders and investors into states of mini-panic---the threat of considerable loss, the anxiety of seeing the a position go against them, and the rush of seeing profits from buying or selling at the time when others are losing.

There is an ever-increasing body of evidence that the same biological substrates for falling in love ( or at the extreme, addictive love) are in play for those dancing on the bridge with stocks, options, futures, currencies, bonds, etc. The primitive brain areas ( rat brain, limbic brain) take over completely, leaving the newer cortical areas shaking their heads and powerless to do anything. The electrical and chemical impulses from the limbic rat brain overpower the new brain completely. Please re-read my article : This Is Your Brain On Trading to get a basic overview of how the brain responds to visual stimuli.


That inability to eat or sleep, the obsession with the beloved trades( especially those with high beta), the strange feeling of ennui which creeps in when the markets are not open, the search for excitement and something to do, going a little bit nutso or doing something wild and crazy just for “kicks� second, sneaking a peak at the markets while working at another job, trading in the car at lunch hour, constant preoccupation with the markets and trading to the exclusion of family and friends, etc. might be more than just normal curiosity about the beloved.

Are we having an affair with the market mistress? Is this true love? Is it addiction? Are we being seduced, teased, abandoned embraced? Are we in a large neurohormonal sink where dopamine begets more dopamine and the chemistry of love turns to the chemistry of addiction?

What do you think? How do you relate to this from your personal experiences? What effects has this had on your mind, body, family, friends, money and spirit?

http://www.youtube.com/watch?v=F0U5J...elated&search=


Thanks!

Doctor Janice

[notouch]

That's a really touching story about you on the plane but it does remind me of how I've irrationally clung to positions long after there's any rational trading logic to holding them. The phrase I often use is that I'm wedded to a particular position. It's not so much a case of being wedded to a market as being wedded to a particular position - for example a long position in the stock index futures. I think it's a case of fear of the market running away just after I close it - just as an over-possessive partner may cling on to you for fear that letting go will result in the end of the relationship. Being wedded to your positions sometimes works in your favour (you're less likely to get shaken out of the market) but other times it works against you as profits slowly disappear as you live in hope that it will come back in your favour - just like people in failed relationships cling to hope of reconciliation. It's odd because I'm fairly brutal in my personal relationships in that if things are not working out I bring them to an end. I need to be more like that when trading. Just as I always remind myself there are other fish in the sea when a personal relationship isn't working out so I need to remind myself that there are plenty of other positions I could be taking in plenty of other markets.

[thetradingdoctor]

Great insight, NoTouch. Are we marrying our positions, or dating them? Are they one or two night stands and "Next" or are we forming an attachment to them because they belong to us?

Relationships with positions bear strong resemblance to relationships with people. Either we get positive energy/reinforcement from them, or they sap our energy like vultures and leave us feeling sad, along, abandoned, disappointed, let down and just plain sick of it all.

Why do we cling to what is not working and forget about what IS working?
Why do we want to come to the emotional rescue of those stocks/bonds/futures/currencies positions that drain our financial, emotional and physical energy?

In life, it is more than likely that the squeaky wheel gets the oil. Who needs help? What is wrong with so and so? What can we do to "fix" them?

Why do we stay in relationships in life which are not working? Are we addicted to fixing? Do we think that, with some kind of magical whatever, that the next day will be different and our partner will change and everything will be just fine the way it was ( or we thought it was) when the relationship started?

Why do we hold and hope when positions are going against us day after day?

The addict is addicted to the feeling he or she had when he or she took that first hit. Those who are chasing the dragon are trying to get back that very first high, while sinking deeper and deeper into addiction.

In what ways does addiction to trading resemble addiction to hope in relationships that are not working?

Thanks!

Doctor Janice

[OAC]

Dear Doc:
Most of us here are professional traders or striving to be professional traders. We treat it as a business. Those who don't treat it as a businesss
have no business in professional trading. As for those who have addictions and trade emotionally ? I wish there are more of them because I love to
take the other side of their trades.

[thetradingdoctor]

Thanks OAC. Yours is a really great response. Because you have this knowledge and experience, it would be wonderful if you would share with us the following as regards behavioral trading:


How do you know when people are trading emotionally or when they are addicted? What do you look for on your screens to find them? How do you know when they are trading so that you can take the other side of the trade?

Thanks for your great input!

Doctor Janice

[Jakew]

Good metaphor with many many possibilities. It wouldn't hurt if I was more fidel. Looks like I leave my loyal and beautiful partner in an early stage of a fruitful relationship all to often. No problems with stop losses though.

[notouch]

OAC, we may be professional traders but none of us are perfect traders. If you don't confront aspects of your trading behaviour that impair your trading performance then you'll never improve.

[Soultrader]

Hello Janice,

Thank you very much for this refreshing yet entertaining thread. While reading it allI can think of was... "that is sooo true!". Looking back at my own experience, the relationship I was most emotionally attached to was during the period in my life when things were the hardest and life was full of uncertainty. Very interesting.

[walterw]

I think as time goes by and experience is there you dont fall in love with market, but the temptation is there... and we must be aware of this temptations, specially on winning positions... thanks Janice for another great thread... cheers Walter.

[thetradingdoctor]

Thank you! There are so many analogies between trading and our lives outside the market, and this is just one of them. This topic is related to fear of loss and fear of success. From a behavioral neurofinance point of view, we are dealing with a core tenant of Kahneman and Twersky's nobel winning economic thesis on Prospect Theory.

Why do we cling to what is not working? Why are we risk averse in the realm of profits and risk taking in the realm of losses? In other words, why do we hold loser and let winners run?

Thanks!

Doctor Janice